Volatility

Volatility is a measure of how the price of an asset – be it a stock, an option or a fund - changes. Volatility tracks how much the price moves and also how fast it changes. Beta is a commonly used statistical measure that represents volatility, and the higher beta is, the greater the risk. There’s usually a reference index such as the S&P 500 and if a stock perfectly tracks the index, it is said to have a beta of 1.0. If it changes more than the index, be it on the up or downside, it is a high beta stock. For example, a stock with a beta of 1.5 means that historically, it has moved 150% for every 100% move in the benchmark index. Mutual funds nowadays provide free volatility measures so you can get a good feel for how stable the fund is year in and year out.

Slow and Steady at SunAmerica Proving Variable Annuity Business Not as Bad as it Seems

Despite a barrage of negative press, it appears that SunAmerica ’s measured approach to the variable annuity business is demonstrating that the successful production of variable annuities is similar to most other lines of insurance . The Hartford ’s recent decision to exit the variable annuity business entirely is attributable in part to their management’s (under significant shareholder pressure) view that the VA business is capital intensive and has relatively unattractive...

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Why Financial De-Risking May Leave Consumers at a Loss

The term de-risk has been appearing frequently in recent financial news.

General Motors’ recent decision to offer lump-sum...

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Mark Warshawsky on the Retirement Income Market

Mark J. Warshawsky is Director of Retirement Research at Towers Watson.

Dr. Warshawsky served as assistant secretary for economic policy at the U.S. Treasury Department from 2004-2006 and he has held senior level economic research positions at the Federal Reserve Board, the Internal Revenue Service and...

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Short-Term Focus has Adverse Impact on Retirement Income Product Development

Warren Buffett’s most recent shareholder letter focuses on the merits of productive assets such as equities in light of the current low interest rate environment and the potential for future inflation.

Buffett’s view is that although productive assets are variable and volatile, they are more likely to preserve future purchasing power than the fixed or currency-based alternatives.

Buffett’s advice would seem to provide a key...

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Why Warren Buffett's Prescription Will Not Work for Retirees

In a Fortune article titled “Why Stocks Beat Gold and Bonds,” Warren Buffett provides a glimpse of his upcoming shareholder letter.

While Buffett’s advice is perfect for investors who have a long-term perspective, anyone near or in retirement may want to think twice about acting on the prescription.

The core of Buffett’s advice is as follows:

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Sequence of Returns Risk

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